American Airlines Cancels 300 Flights Amid Feud With Pilots

9/21/2012 9:57 AM ET

American Airlines, a unit of AMR Corp. (AAMRQ), has canceled 300 flights nationwide this week, representing 1.25 percent of its schedules, citing a high number of pilots reporting sick and an increase in maintenance reports filed by flight crews.

American Airlines said earlier this week that it plans to cancel about 1 to 2 percent of its flights through the end of October. The U.S. carrier also said it has notified more than 11,000 employees that they could lose jobs as part of its bankruptcy reorganization.

The third-largest U.S. carrier and its pilots are in a dispute over a new labor contract, as pilots rejected the company's latest contract offer in August.

Eight of the airline's nine union labor groups have ratified cost-cutting contracts, with pilots being the only major group to disagree on contract concessions.

The Allied Pilots Association or APA, certified collective bargaining agent for the 10,000 pilots of American Airlines, said Wednesday it has called no job action at American Airlines.

Further, the union said that pilot sick rates have not deviated from normal historical rates and crew cancellations remain at normal rates.

In a statement, APA said, "One area of increased operational unreliability we have observed is in mechanical delays, which isn't surprising. Although American Airlines operates the oldest fleet of any major U.S. carrier, management has decided to furlough a large number of mechanics and close one of its largest maintenance facilities."

In early September, the U.S. Bankruptcy Court in the Southern District of New York authorized American Airlines to reject the collective bargaining agreement with pilots represented by APA, as part of the airline's bankruptcy exit plan.

The APA was the only union not to have reached an agreement as American Airlines is primarily seeking a 20 percent reduction in the APA's total labor costs, averaged over the six-year term of the proposed agreement, amounting to $370 million annually in cost reductions.

AMR had said in early February that it will cut 13,000 jobs as it reorganizes under bankruptcy protection. The airline is trying to cut annual labor costs by about $1 billion.

AMR has blamed rising labor costs as a major cause of its bankruptcy filing. AMR and its subsidiaries had filed for Chapter 11 bankruptcy protection in November 2011. AMR has until late December to present a restructuring plan to exit bankruptcy protection.

American Airlines had earlier flirted with bankruptcy in 2003, and avoided it at that time only because it was able to negotiate new collective bargaining agreements in which the unions provided significant economic concessions over their prior agreements.

AMR, which had shrugged off takeover interest expressed by smaller rival US Airways Group, Inc. (LCC: Quote) and insisted on a stand-alone restructuring plan, entered into a non-disclosure agreement with US Airways earlier in September so that the two can share confidential information for evaluating a potential merger.

In Friday's regular session, AAMRQ is trading at $0.37, up $0.01 or 2.20 percent on a volume of 364,793 shares.